Evraz - 2Q19 Trading Update Review and 1H19 Earnings Preview
Evraz has released a trading update for 2Q19 showing strong steel production volumes and a nice Q-o-Q pickup in domestic steel sales volumes and average steel realized prices. For 1H19, we expect a 21% H-o-H decline in EBITDA to $1,480 mln, for a weakish 24% margin on the back of lower steel prices H-o-H and a drop in the FeV price. We project 1H19 leveraged FCF at $680 mln, for a 6% yield. We expect a dividend payout of up to 100% of FCF, and we think the interim dividend will be at least $600 mln (a 5% yield). At current spot commodity prices and the USD/RUB rate, Evraz is trading at a 2020E EV/EBITDA of 6.4 and a 7% dividend yield, making it more expensive than peers.Evraz engages in the production and distribution of steel and related products and coal and iron ore mining. Co. also produces vanadium products. Co. has four segments: Steel, which includes production of steel and related products at all mills except for those in North America, and includes the extraction of vanadium ore and production of vanadium products, iron ore mining and enrichment and certain energy-generating companies; Steel, North America, which includes production of steel and related products in the U.S. and Canada; Coal, which includes coal mining and enrichment; and Other operations, which includes energy-generating companies, shipping and railway transportation companies.
Sberbank CIB Investment Research is a research firm offering equity, fixed income, economics, and strategy research. It covers analysis on all aspects of Russia’s capital markets, issues and industries. The firm analyzes trends in Russia and combines local knowledge with a global perspective. It processes macroeconomic data, market and company-specific news, stock quotes and other information for providing research reports. The firm provides details and latest prices on the most traded names and most traded paper on all segments Russian market. In strategy research, it provides thematic research, tips and descriptions of the methodology used to evaluate companies.
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